Panamanian police outside the headquarters of Mossack Fonseca, Panama City, 12 April 2016. (EPA/Alejandro Bolivar)
By Emma Bapt
The biggest leak in history, the Panama Papers have cast an uncompromising glare on the inner workings of offshore finance and revealed how some rich and powerful can hide assets from authorities to dodge taxes, launder money, commit fraud and evade international sanctions.
The leak to a German newspaper originated with a Panamanian law firm, Mossack Fonseca, and included 11.5 million documents — 2.6 terabytes of data.
Investigative reporters from news organizations around the world then shared the documents and found a treasure trove of financial information on more than 200,000 offshore entities, implicating a dozen current leaders and forcing the resignation of Iceland’s prime minister.
Offshore businesses are not inherently illegal, and Mossack Fonseca — the fourth largest offshore law firm in the world — denies wrongdoing, saying it does not offer “solutions whose purpose is to hide unlawful acts such as tax evasion.”
But digging by reporters at a consortium of news outfits including the Guardian, Le Monde and the BBC have shed light on shady practices of wealthy individuals including some public officials.
What we know about the offshore industry
The offshore industry is nothing new. Offshore tax havens have been around for more than two centuries, allowing many individuals and businesses to avoid paying taxes in their home countries and to hide assets from prying authorities.
Tax havens — jurisdictions with low tax rates — include the British Virgin Islands, Panama, the Bahamas, the Seychelles and dozens of other countries.
According to the Bloomberg Billionaires Index, more than 30 percent the world’s 200 richest people have placed part of their personal fortune in an offshore company.
“Tax havens are now at the heart of the global economy,” said Nicholas Shaxson, author of the book Treasure Islands. “Their tentacles have curled their way into pretty much everything.”
A long, distinguished line of leaks
The Panama Papers is the latest — and biggest — leak in a line of uncovered secrets that have shaped history.
One of the most consequential leaks was the Pentagon Papers, a trove of U.S. government documents published in 1971 that revealed the true extent of American military involvement in Southeast Asia between 1945 and 1967, and disclosed official lies about the war in Vietnam.
The Pentagon Papers contributed to the downfall of U.S. President Richard Nixon in 1974.
Other blockbuster leaks included Julian Assange’s Wikileaks, a non-profit organization that in 2006 started publishing secret information, news leaks and and classified media from anonymous sources on a range of explosive issues, including U.S. military conduct in Afghanistan and Iraq, and corruption in Kenya.
In 2013, a former U.S. Central Intelligence Agency employee, Edward Snowden, exposed details of a U.S. agency program involving the phone and Internet surveillance of millions of Americans. His revelations have fanned a global debate on the right to privacy versus security.
The Panama Papers stand apart by their sheer size — 2.6 terabytes compared to 1.7 gigabytes for Wikileaks — and the insight it has brought into the secret world of the offshore industry.
Politicians and public officials from 200 countries were involved.
The International Consortium of Investigative Journalists (ICIJ), based in Washington, DC, has overseen the unprecedented global collaboration by news organizations to dig into the secret files. The ICIJ published a database of secret files in May.
Countries with politicians, public officials or close associates implicated in the leak, 15 April 2016. (Wikimedia Commons)
The documents were initially leaked over a year ago by an anonymous whistleblower, John Doe, to German newspaper Süddeutsche Zeitung.
The documents included vital attorney-client information from more than 200,000 offshore entities connected to people in more than 200 countries.
Secret files show that 140 politicians and public officials around the world, including 12 current or former leaders, have connections with offshore companies.
They include the former prime ministers of Iceland and Pakistan, the president of Ukraine and the king of Saudi Arabia. Iceland’s prime minister stepped down amid public outrage.
Files reveal that $2 billion was secretly transferred through banks and shadow companies by associates of Russian President Vladimir Putin.
Over 500 banks, including HSBC, UBS and Société Générale, created more than 15,000 offshore companies for their customers through Mossack Fonseca.
For the power players involved, click here.
“The laws are so poorly designed.”
The Panama Papers have shed light on inequalities and injustices created by the offshore system.
“It’s not that they’re breaking the laws,” said U.S. President Barack Obama. “It’s that the laws are so poorly designed.”
At an anti-corruption summit in London last month, planned before the Panama Paper disclosures, countries from Britain to Afghanistan pledged to step up efforts to make it harder to launder the proceeds from corruption.
An unanswered question is whether the Panama Papers will in the long run force the rich and powerful to stop using tax havens to conceal assets, or whether the offshore industry will use its influence and adapt to changed circumstances.
Emma Bapt is a first-year undergraduate student at King’s College London, studying History and War Studies. She has lived in London, Singapore, Hong Kong, Milan and Paris. She is interested in learning about the dynamics of conflict and looking at peace-building policy around the world. She is News-Decoder’s summer intern.